‘The dominoes are starting to fall’: Retailers are going bankrupt at a staggering rate

April 11, 2017

Retailers are filing for bankruptcy at an alarming rate that’s quickly approaching recessionary levels.

It’s only April, and nine retailers have already filed for bankruptcy since the start of the year — as many as all of last year.

“2017 will be the year of retail bankruptcies,” Corali Lopez-Castro, a bankruptcy lawyer, told Business Insider after she attended a recent distressed-investing conference in Palm Beach, Florida. “Retailers are running out of cash, and the dominoes are starting to fall.”

Payless ShoeSource, hhgregg, The Limited, RadioShack, BCBG, Wet Seal, Gormans, Eastern Outfitters, and Gander Mountain are among the retailers that have filed for bankruptcy so far this year, and most are closing hundreds of stores as a result. On top of those closures, retailers that are staying in business — at least for now — are shutting down a record number of stores.

More than 3,500 stores are expected to close over the next several months.

Annual retail bankruptcies peaked at a total of 20 in 2008 — a level that the US could reach by September if the current rate of filings continues, according to CNBC.

During the recession, private equity firms and banks came to the rescue of some retailers and brought them out of bankruptcy through restructuring.

But there aren’t many firms willing to rescue dying retailers these days, according to RBC Capital Markets.

“Private-equity firms [and]  banks seem less willing now to step in to save these failing retailers as the issues this time around are more structural rather than quick operational fixes,” RBC analysts wrote in a recent research note.

Retailers stores closing 2017Mike Nudelman

In other words, shoppers’ habits are fundamentally changing, and some retailers just aren’t cut out to survive in the new retail environment.

Traditional retailers with large fleets of physical stores have been hit the hardest.

Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield.

And people are now devoting bigger shares of their wallets to restaurants, travel, and technology than ever before, while spending less on apparel and accessories.

Woodbridge Mall New Jersey  7301Business Insider/Sarah Jacobs

Malls across the country are struggling to stay open as stores close in droves. But it’s getting increasingly more difficult to find replacements for lost tenants, according to RBC Capital Markets.

“Over the last few years, we believe most of the emptied store space has been taken over by expansion of restaurants, entertainment spaces/movie theaters, and health & wellness destinations (hair/nail salons and fitness studios),” analysts wrote. “If store closures continue, we find it harder to imagine there is a solid supply of concepts willing to take over these [locations].”

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For the retail industry’s brick-and-mortar stores, the realities of online shopping and changing tastes have driven down sales, causing hundreds of locations to close their doors.

So what’s the status of the stores making headlines these days? Here’s a quick guide:

Abercrombie & Fitch: The preppy classic clothing store is closing 60 U.S. stores during the 2017 fiscal year as leases expire, CNBC reported. This follows the closing of 53 domestic shops last year and likely won’t be the end of it. The company has more than 700 locations, and half of them have leases that will be up for renewal by the end of fiscal 2018, lending the option to more closings.

Aeropostale: The teen clothing store filed for Chapter 11 bankruptcy in May 2016 after losing money for 13 consecutive quarters. They announced the closing of 154 of its approximately 800 locations, with 113 closings in the U.S. and all 41 Canadian locations closing. In a negotiating fight that lasted into fall 2016, the company was able to save 504 stores and keep them operating, saving 26 percent more stores than it had initially projected would stay open.

American Apparel: The signature “Made in the USA” California-based brand will be closing all 110 of its stores by the end of April, CNBC reported. On Jan. 10, a Canada-based company won the auction of rights to the brand but has indicated that it will not take on any of the 110 stores, causing American Apparel to begin shutting them down.

American Eagle Outfitters: American Eagle has been struggling as sales have been dropping in the last few years. In 2013, the company announced it would close 150 of its approximately 1,000 stores over a three-year period, Reuters reporter.

Barnes & Noble: The bookstore will close its Bethesda, Maryland location at the end of 2017. Barnes & Noble only closed eight stores in 2016 and currently has 640 locations as of 2016.

BCBG: BCBG Max Azria Group filed for bankruptcy protection in March. The company is closing about 120 stores, mostly in the U.S., CNBC reported. Liquidation sales started in February and will run eight to 10 weeks before the stores close for good.

Bebe Stores Inc.: The specialty women’s apparel chain will close 21 of its 172 locations, some 12 percent of its outlets, according to CNBC.

Casual Adventure: The outdoor equipment outfitter in Arlington, Virginia is closing its doors after 61 years of business. The family-owned store has been operated by four generations but can’t stay open any longer due to online competition and growing demand for the property.

Children’s Place: The children’;s clothing company plans to close up to 300 stores through 2020 to focus on online shopping and began the downsizing process in 2015, CNBC reported. However, a surge in profit during the first quarter of the fiscal 2017 year looks encouraging.

Crocs: The plastic clog company will close 160 of its 558 stores by the end of 2018, according to Forbes.

GameStop: The new and used video game retailer announced in March that it would be closing 2 to 3 percent of its global store footprint, which could mean as many as 190 stores, CNBC reported. GameStop currently has more than 6,600 stores globally, with 4,400 in the U.S.

HHGregg: The electronics retailer giant is going out of business after more than 60 years. The company announced in March it plans to begin closing 88 of its 132 stores and three distribution centers. Liquidation sales are currently underway and should be complete by mid-April.

J.C. Penney: The nearly 115-year-old department store announced in February that it will close 130 to 140 stores and two distribution centers over the next several months, but reversed course Thursday, announcing that it has postponed liquidation sales and closures of those stores. “The liquidation will now begin May 22 instead of April 17 as originally scheduled,” according to CNBC. The new closure date, July 31, is about six weeks later than originally planned, CNBC reported. J.C. Penney currently has 1,014 locations.

Kemp Mill Music: After more than 40 years selling music in 36 different locations in D.C., Maryland, Virginia and Delaware, Kemp Mill Records closed its last store in March, ending a music legacy to many local music lovers and musicians.

Kenneth Cole: The clothing store announced in November that it would close all of its 63 outlet stores in the U.S. over six months, CNBC reported. The company said it would instead focus on expanding their online and full-price retail footprint across the globe.

The Limited: After 50 years in business, The Limited filed for Chapter 11 bankruptcy protection after closing all 250 stores in January, CNBC reported. The store’s styles will now be available online only.

Macy’s: Macy’s announced in January that it will be shutting down 65 stores in 2017. The company announced in August 2016 a planned shutdown of about 100 stores out of its 730 locations.

Office Depot: The home goods store said it would close 300 more stores in the next three years to cut costs by the end of 2018, Time reported. The brand already closed 400 U.S. stores by the end of 2016. As of 2017, there are approximately 1,400 retail stores in North America, according to their website.

Payless ShoeSource: Payless announced in early April that it had filed for Chapter 11 bankruptcy and will close nearly 400 stores in the U.S. and Puerto Rico. Payless has about 4,400 stores in more than 30 countries.

RadioShack: The electronics store filed for Chapter 11 bankruptcy for the second time in just over two years. The company is currently in the process of closing 200 stores and will then evaluate options for the remaining 1,300 locations. “Several hundred” of the Sprint wireless carrier shops within RadioShack will turn these locations into Sprint-only stores.

Ralph Lauren: The luxury brand announced in early April that it will not renew the lease on its Flagship 5th Avenue store in New York City, according to CNBC. It also plans to close more than 50 stores and focus on its three core brands, it announced in June 2016.

Sears and Kmart: The company that owns both retail chains announced plans to close 150 unprofitable Sears and Kmart locations, as well as sell off its Craftsman business. The company also acknowledged “substantial doubt” that it will be able to keep doors open.

Sports Authority: The sporting goods store announced it would close 140 of its 450 locations in March 2016 and filed for bankruptcy protection that same month, according to CBNC. However, after failing to get funding, the company said in May that it would focus solely on mergers and acquisitions, selling and closing all of its 460 remaining stores.

Staples: The office supply store announced in March that it would close 70 stores in 2017 after reporting fourth-quarter sales were weaker than expected. In the last two years, a combined total of 242 stores have been closed.

Wet Seal: The teen apparel retailer filed for bankruptcy protection in February for the second time after filing for Chapter 11 bankruptcy in 2015. The company plans to close all of its 150 stores this spring, CNBC reported.

Source: LIST: Here Are the Retail Stores Taking Hits, Closing Hundreds of Locations | NBC4 Washington
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